On 24th June 2019, vide a notification by the Central Board of Direct Taxes, the tax exemption granted on the disability pension was partly done away with. The raison d’être for this appalling move was grounded in probable exploitation of this liberal exemption by the soldiers to avail financial benefits. The advocates of this waiver claimed that this curb will plug the prevalent loopholes in the taxing regime wherein the soldiers who suffered disabilities due to their ‘faulty lifestyles’ as opposed to reasons associated with their service will be barred from putting forth vexatious claims for pension. They further advanced that it will ensure that the income tax waiver under Section 297(2)(l) of the Income Tax Act, 1967 is only utilized to the benefit of the actually disabled. The move was later on supported by the Army headquarters due to the aforementioned vexatious reason. However, voices have also been raised by the defence fraternity against the ignorant decision by filing petitions in the Supreme Court, due to which recommendations have been sought on the move by the Defence Minister, Mr. Rajnath Singh, from three service chiefs of the nation. The Chiefs of Staff Committee (COSC) submitted that the income tax exemption should only be allowed on the disability pension upto a certain financial limit beyond which the pension should be taxable and thus, has recommended a discreet roll out of the June notification.
A Temporary Suspension
Most recently, a circular was issued by the Principal Controller of the Defence Accounts (Pensions) in February 2020 directing tax deduction on pensions as validated by the June 2019 notification. As an outcome of the same, many pensioners received minimal amount of Rs 100 in their bank accounts which led to widespread outrage in the defence fraternity.
Taking cognizance of the fragile situation, the Ministry of Defence directed the PCDA to temporarily suspend the circular as the matter against the aforementioned notification is pending before the Apex Court.
Conundrum over the Exclusionary Nature
As the case awaits the final call of Supreme Court, the author is of the opinion that the decision of taxing the disability pension bedraggled in sheer ignorance and exclusion should be done away by the Apex Court because of the following reasons:
At the outset, it excludes the disabled soldiers who despite their impairment continue to serve this nation and retire after rendering full time service. One such prominent example is Maj Gen (Retd.) Ian Cardozo who had amputated his leg after gallantly fighting the 1971 War and yet continued to render exemplary services to the country. Moreover, there are many soldiers who suffer from symptoms of PTSD after being active in counter-insurgency or war like operations but remorsefully, the present system fails to pay heed to the same and such cases remain undocumented.
Secondly, this notification is an outright case of misconstruction of the term ‘invalidated from service’. The CBDT notification ignorantly deems it to mean ‘ousting from the service’ or ‘termination of service’. However, in Mahavir Singh Narwal v. Union of India 111 (2004) DLT 550, the Court held ‘invalidated from service’ to mean relegation to a lower medical category than what the individual was recruited in. This is in consonance with Regulation 173 of Pension Regulations for the Army, 1961 (Part I) which stipulates that invalidated from service pertains to removal to a lower level of medical category.
Thirdly, as reflected above, it makes the exemption applicable to only those soldiers who suffer ‘bodily harm’ and is thus exclusive of invisible disabilities like sensory, intellectual and psychiatric disabilities. This is not in congruence with the evolved and inclusive ambit of ‘disability’ which takes into consideration mental, intellectual and sensory impairment as incorporated under Section 2(s) of the Persons with Disabilities Act, 2019, a domestic arm of UN Convention on the Rights of Persons with Disabilities, 2008.
Lastly, it brashly negates various judicial pronouncements wherein it has been held that any impairing alteration in the health of the soldier which didn’t exist during his/her entry into service, as recorded by the Medical Board, will be taken as attributable to or aggravated by service. This rule of benefit of doubt and liberal interpretation was upheld in Dharam Vir Singh v. Union of India 2002 (3) AWC 1818. The statutory roots for the same can be traced to the Regulation 173 of Pension Regulations for the Army, 1961 (Part I) and Rule 423 of Chapter VIII of the Guide of Medical Officers (Military Pension), 2002.
In Madan Singh Shekhawat v. Union of India & Ors. (1999), the Supreme Court delineated that the rules for the grant of disability pension as emulsified under Regulation 173 of Pension Regulations for the Army Part-I, 1961 are to be construed liberally. Since it’s a beneficial provision, rigidity in interpretation is to be shunned away. However, by way of the reasoning furnished by proponents of the liability imposition, it can be affirmed that above-mentioned ratio has been done away with. Waiver of exemption for all at the behest of a few who exploit the loopholes does not constitute liberal interpretation but is rather restrictive application of disability pension rules which is deleterious for the many who are genuinely entitled to financial support.
Servicemen v. Civilian Counterparts: Stress, Strain and Guarantees
As compared with their civilian counterparts who are guaranteed job security and even alternative employment in different governmental department with similar emoluments under Section 20 of the Persons with Disabilities Act, 2016, the defense personnel diagnosed with disabilities aren’t promised the same. Moreover, they are also not backed up with vocational training which is guaranteed to the civilian workforce under Section 19, Persons with Disabilities Act, 2016. Thus, the disability pension is the only secure way of affording financial security for themselves and their dependents. Making the same taxable only impairs and curtails the financial support granted to them.
Coupled with the same, as per the Report by Committee of Experts constituted under the Ministry of Defense, it was profusely elaborated that any disability which arises during the course of service shall be attributed to the stress and strain of service and the burden to prove incoherence in the claims would vest with the refuting authorities. As per the aforementioned statutory stipulations, there is a presumption in favor of the serving soldier who is disabled during the course of service and the same is to be validated while ascertaining claims of disability pension. Though this ratio has been upheld in various cases like Union of India v. Rajbir Singh (2015), it has been disrespected by the rationale underlying the mandate imposing tax liability. The presumption of innocence of a soldier has been converted into an assumption of falsification of claims which has resulted in waiver of the financial aid.
Painting the Unexpected Realities: What lies ahead?
The imposition of liability does not in any way cement the loopholes but it only disregards the reality which surrounds the soldiers of this country. By waiving off the erstwhile aid, the authorities go no far than vilifying and abandoning the claims of the servicemen and adding onto the governmental revenues. This addition of financial burden does not automatically put a cork on the porous system, but rather fails to guarantee in any manner that the exploitation of the benefits will end. It only minimalizes the minimal support which was granted to them.
The USA and the UK, despite the rise in claims for such pensions, continue to follow the erstwhile rational Indian model wherein the disability pension granted to the servicemen is tax free. Apart from the same, they also provide vocational training and alternative employment opportunities for their disabled soldiers. Additionally, their ambit of disability is in congruence with the inclusive reality, i.e., they recognize the invisible disabilities like PTSD and grant the soldiers tax free pensions and counselling for the same.
As the case against this notification is pending in the Supreme Court, it is imperative for the Court to take into consideration that the turbulent notification does not plug the vacuum in the regime but it only hampers financial aid to the ones who are abandoned by the system. It recklessly goes against the legislative intent and judicial interpretations. If the aim is to put an end to the vexatious claims, the system should be improvised for better authentication of claims. Moreover, apart from recognizing the invisible disabilities, effective rehabilitation programs, which are already available to the civilian counterparts, should be effectuated for aid of their military counterparts. The need of the hour is to aid the selfless men in uniform by assuring and strengthening the strings of their financial reliance.
This article has been authored by Nimrat Kaur, a fifth year student at Symbiosis Law School, Pune.